Asian currencies, greenback drop after Christmas

‘LINE IN THE SAND’ The euro spent the majority of the week consolidating against its US counterpart, trading at between 1.3915 and 1.4125 to the dollar

BLOOMBERG AND AFP , NEW YORK

The US dollar traded lower on Friday against the euro, dropping below the key 1.4000 level in post-Christmas trading as the greenback consolidated the week within tight ranges amid thin turnover.

The euro fetched US$1.4025 in New York against US$1.3991 on Wednesday evening.

The currency market was closed for Christmas on Thursday and experts said the low turnover during the largely holiday period led to sharp movements.

David Solin of Foreign Exchange Analytics said investors should not read too much into the currency movements during this thin trading period.

The euro spent the majority of the week consolidating versus the US dollar between 1.3915 and 1.4125, and “these levels remain the proverbial lines in the sand,” said Terri Belkas, currency Strategist with Forex Capital Markets.

“A break above or below the bounds will suggest that price will continue to move in that direction,” she said.

The dollar fell 1 percent against the euro the past week and was up about 1.5 percent versus the pound and yen by Friday’s close, Belkas said.

The dollar was slightly higher at ¥90.78 in New York Friday from Wednesday’s close of ¥90.42 as the Japanese currency came under pressure after gloomy data showed that the global financial and economic crises were taking a major toll on Asia’s biggest economy.

Asian currencies also fell last week, led by the Indian rupee, on concern the deepening global economic slump will hurt the region’s growth prospects and exports.

The rupee was the worst performer among the 10 most-active Asian currencies as a finance ministry report last week showed the economy may expand at the slowest pace since 2003.

Thailand’s baht had the biggest weekly loss in almost seven months as the government predicted an onset of a recession.

A Japanese report showed industrial production fell the most in 55 years last month.

“While we are not calling ... a structural collapse in Asian currencies, we think sentiment and further macroeconomic weakness are likely to continue to weigh on them for now,” said Nizam Idris, a currency strategist with UBS AG in Singapore. “Trading will remain slow until early 2009.”

The rupee slid 2.5 percent this week to 48.445 a dollar in Mumbai, Bloomberg data showed. Indonesia’s rupiah fell 1.4 percent to 11,100 and the New Taiwan dollar dropped 1.5 percent, the most in two months, to NT$33.025.

Japan’s factory output tumbled 8.1 percent last month from October, when it dropped 3.1 percent, the Trade Ministry said on Friday.

The Thai economy will contract 2 percent to 3 percent this quarter and shrink in the three months through March as well, Somchai Sujjapongse, a spokesman at the finance ministry said on Wednesday.

The MSCI Asia Pacific Index of regional shares dropped 2.2 percent this week, extending the year’s losses to almost 45 percent, the worst in its two-decade history.

Malaysia’s ringgit fell 0.3 percent last week, extending this year’s drop to 4.8 percent, compared with a 28 percent loss in South Korea’s won and a drop of 18.6 percent in India’s rupee, the worst performers in Asia this year.

The ringgit traded at 3.4800 against the dollar in Kuala Lumpur. It reached 3.6474 on Dec. 5, the lowest level since November 2006.

The Vietnamese dong fell to a record low after the State Bank of Vietnam on Thursday devalued the currency by 3 percent to help spur exports.